Gold Over $1808 – May Be Poised for `Parabolic’ Rise; People in West Not Prepared for Possible Currency Crisis

All major currencies have fallen sharply against gold again today but especially the ‘commodity’ fiat currencies of the Australian, New Zealand and Canadian dollar. Swiss francs are also under pressure again today.

The London AM fix was a second consecutive record nominal high in USD. Gold’s London AM fix this morning was USD 1,794.50, EUR 1,246.44, GBP 1,087.12 per ounce (from yesterday’s USD 1,792.00, EUR 1,240.39, GBP 1,089.96 per ounce).

In my interview this morning on Bloomberg, the interviewer picked up on our recent suggestion that gold could go parabolic soon. Indeed, we said that it is likely not a question of if – but rather when.

A short interview is not conducive to informing people and therefore we wish to elaborate about a possible parabolic move.

Bull markets almost always end in a mania phase where there is a near universal belief that an asset class or security is going to rise and there is no risk involved.

This has been seen throughout history and was seen with the Nikkei, the Nasdaq and more recently with property markets in Ireland, the UK and the U.S.

It was also seen with gold in the 1970’s when gold increased 128% in 1979 alone. On January 2nd 1979 gold’s London AM Fix was $227/oz. By the 31st of December, gold’s London AM fix was $524/oz.

21 days later gold had increased another 60.9% to $843/oz.

This is parabolic.

Today’s 27% rise year to date in dollar terms is very tame in comparison.

The blind belief that an asset class, security or currency is a one way path to financial nirvana always leads to a bubble and the bursting of that bubble.

Today there is no such blind belief. Gold remains the preserve of the smart money – those who know their financial and economic history.

It is also the preserve of those who understand the importance of real diversification due to the risks posed by currency debasement and inflation.